Global Quality Mid Cap - April Commentary

This is a marketing communication. Please refer to the prospectus, supplement and KID/KIID for the Funds before making any final investment decisions. The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.  

Past performance does not predict future returns. 

In the 1st quarter of 2025, the Guinness Global Quality Mid Cap Fund returned -10.9% (in USD) whilst the MSCI World Mid Cap Index returned -0.3%. The Fund therefore underperformed the MSCI World Mid Cap Index by 10.6 percentage points. Discrete 12m returns are shown below.

Q1 2025 proved to be difficult for the Fund, which, having seen strong performance over January, ultimately saw a performance rotation as overweight exposures became out of favour – firstly from our overweight exposure to data centres build outs, which was hit hardest on the DeekSeek announcement, and secondly, ongoing concerns of the impact on the global economy by the Trump administration’s trade policies which left investors seeking more defensive-orientated businesses.

The Fund’s overweight exposure to the electrical infrastructure structural theme was a drag on performance after the DeepSeek announcement in late January left investors reassessing their AI exposures. This was predominantly felt through our capital goods exposure (including holdings Vertiv and Hubbell) but also through some IT hardware and equipment names (including Arista and Delta Electronics). As discussed in the commentary, despite the market volatility around the announcement, we have continued to see the market upgrade capex expectations for the largest data centre providers, whist the stock weakness has been driven by valuation compression.

The big talking point for global equity markets in Q1 2025 was, of course, tariffs. Whilst it is not a huge surprise that the current US administration are enacting tariffs (Trump made multiple references to this during the presidential campaign), the market was however spooked by both the breadth (including levies on cars, auto parts, steel, aluminium, alcoholic beverages etc.) as well as the unpredictability of America’s broader trade policy, which seems to be changing in real time. The unpredictability has made it hard for businesses to prepare accordingly and even harder for investors to understand the long-term implications of the trade disruptions.

Source: Google Trends Data as of 31st March 2025

Looking across the Fund, we believe that the majority of our companies are well protected from the worst impacts of these tariffs. Whilst it is inevitably difficult to avoid the disruptions to global supply chains and there may well be several second order effects (slower growth, higher inflation etc.), the characteristics of the companies that the Fund invests in help to offer some protection in uncertain environments – companies with proven track records of persistently high return on capital, low leverage, and driven by structural growth as opposed to cyclical growth. These are some of the ‘high quality’ tenets of the Fund’s holdings and shows why, in times of heightened uncertainty, such companies tend to be more resilient than speculative growth business. On the flipside, when looking at the areas that have been most impacted by tariffs, autos & components stands out (falling -24.0% in USD over Q1). We don’t own any names in this industry, and that is by design instead of by chance. These are generally ‘lower quality’ companies that have smaller margins, more complex supply chains, are exposed to commodity prices, and can often be caught up in trade wars given their domestic and geopolitical importance.

In this commentary we assess these leading drivers of market returns and fund performance in Q1 and report on the leading and lagging holdings in our 30-stock portfolio.

Past performance does not predict future returns

Fund launch: 15.12.2020

Source: FE fundinfo. Net of fees. Investors should note that fees and expenses are charged to the capital of the Fund. This reduces the return on your investment by an amount equivalent to the Ongoing Charges Figure (OCF). The OCF for the calendar year 2024 for the share class used for the fund performance returns was 0.89%. Returns for share classes with a different OCF will vary accordingly. Transaction costs also apply and are incurred when a fund buys or sells holdings. The performance returns do not reflect any initial charge; any such charge will also reduce the return.

The value of this investment can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested.

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